European Affairs

Political Stability Takes a Siesta in Spain     Print Email
By Ryan Barnes, Senior International Trade Specialist, U.S. Department of Commerce

ryan barnes photo 2The Spanish political system has been turned upside down. The bipolar political stranglehold of the center-left Socialists (PSOE) and center-right Popular Party (PP), who have alternated in power for most of the post-Franco democratic era in Spain, has eased. Upstarts from the both the right and left, Ciudadanos and Podemos, respectively, have crashed the party. Add a resurgent Catalan independence movement to the mix and politics in Spain have never been as turbulent and unpredictable. The December 20th elections, which were supposed to provide some clarity, have created an even more uncertain political landscape.

Prime Minister Mariano Rajoy’s ruling Popular Party was once again the largest party, garnering nearly 29 percent, followed by the Socialists at 22 percent, Podemos at 21 percent, and Ciudadanos at 14 percent. While victorious, the Popular Party lost roughly 4 million votes and over 60 seats compared to the 2011 elections. The Socialists, meanwhile, lost 20 seats. Podemos and Ciudadanos were the big winners and are positioned to potentially play a key role in the formation of the next government.

Spain is still without a government. The PP, as the biggest vote-getter, has tried to form a coalition, to no avail. The Socialists are now threatening to cobble together a government of the left, presumably joining forces with Podemos and others. Iberian neighbor, Portugal, recently saw a similar outcome in its elections, with the center-right party gaining the most votes but having to ultimately give way to leftist opponents. Podemos has, thus far, been non-committal, and while both parties are on the left, they differ over the extent of change needed and Catalan independence. Ciudadanos has also balked to acceding to a government of the right under Rajoy. A new election may be the only thing that can break the deadlock. What happened?

Much of the campaign debate revolved around the economy, and rightly so. Spain has experienced a massive economic downturn, resulting from the bursting of a housing bubble in the middle of the global financial crisis, and was nearly forced to accept a bailout with the likes of Greece, Ireland, and Portugal. The Socialists oversaw the beginning of the economic meltdown and received much of the blame, resulting in an electoral landslide for the Popular Party in 2011. The PP was able to abstain from a politically-toxic bailout and pushed through a painful austerity program, reshuffle of the banking system, and structural reforms. Rajoy was betting on these painful measures ultimately bearing fruit near the end of his tenure and aimed to ride the economic upswing to another term in office.

Many say Rajoy has been proven right. The economy is doing a lot better. Spain grew the most in the Eurozone in the third quarter of 2015 and unemployment, while stubbornly high, has fallen. Rajoy and the PP touted this record as proof that their economic program has worked. So why was the PP dealt such a blow in the elections?

While improving, the economy is far from its dizzying pre-crisis heights, and austerity has hit hard. But in this case it’s not just the economy, stupid. The reason why seemingly polar opposites, Podemos and Ciudadanos – the former is an anti-austerity far-left party in the mold of Syriza in Greece while the latter espouses free market economics – can both come out of obscurity and earn a combined 109 seats does not revolve around the economy.

Many Spaniards are disgusted with what they see as an endemically corrupt political system, with the traditional PP and PSOE taking turns getting rich and divvying out spoils to supporters. Rajoy came under fire, in particular, for a scandal in which his party’s treasurer, Luis Barcenas, was found to have maintained a party slush fund for nearly two decades. The Socialists, meanwhile, have also had their share of brushes with corruption.

Even the Spanish royal family, which has largely been viewed as a fairly trustworthy institution - former King Juan Carlos was widely credited with helping ease the post-Franco democratic transition - has been tarnished by allegations of impropriety. King Juan Carlos, who abdicated to Prince Felipe in 2014, was seen as insensitive when he was photographed taking a luxurious hunting trip to Botswana during the height of the economic crisis in Spain. To make matters even worse, his daughter, Princess Cristina, and her husband, Inaki Urdangarin, are currently on trial. Urdangarin is accused of exploiting his political connections to secure lucrative contracts for regional governments and embezzling nearly $7 million in public funds. Some of this money was allegedly funneled into Aizoon, a company they co-managed, and used to pay for some of their personal expenses. Cristina faces up to eight years in jail for tax evasion and Urdangarin up to nineteen years for tax fraud, money laundering, and document falsification, among others.

It is thus no wonder that public trust in the system is arguably at an all-time low. To be sure, corruption was a top concern in voters’ minds. And some saw the young leaders of Podemos and Ciudadanos – Podemos head Pablo Inglesias is 37 and Ciudadanos chief Albert Rivera is 36 – as the fresh start needed to stop the rot and put an end to the vast patronage system in Spain.

Not to be outdone, Catalonia, the northeastern Spanish region home to a longstanding but burgeoning separatist movement, has been working through internal political issues of its own. In regional elections this past September, parties from across the political spectrum – led on the left by the Republican Left of Catalonia (ERC) and on the right by the traditionally dominant Convergence and Union Party (CiU) – banded together to run on a joint list calling for Catalan independence.

“Junts pel Si” (Together for Yes) won 40 percent of the vote but has been unable to form a government. A far-left party outside of the Junts pel Si coalition, CUP, spoiled efforts to cobble together a regional government under the leadership of CiU head Artur Mas. Right before the deadline that would trigger new elections, Mas agreed to step down as head of the group and Catalan separatists formed a new government with Girona mayor, Carles Puigdemont, replacing Mas at the helm. Vowing to move forward unilaterally with measures to lay the groundwork for Catalan independence, the new government has already invoked the ire of Madrid, with still Acting PM Rajoy declaring that he will utilize all the resources of the central government to prevent any secessionist steps taken by Puigdemont.

Spain has no central government while Catalonia now has new leadership bent on breaking away. Where do they go from here? Although Sanchez and the Socialists have now come out in favor of a progressive coalition, they would need agreement from Podemos, which has been against serving as a junior partner with a party it is seeking to ultimately displace as the leader of the Spanish left. Ciudadanos, meanwhile, has similarly refused to join forces with Rajoy and the PP, which it views as the corrupt establishment. And no one has been willing to sign off on a minority government led by Rajoy.

Either Podemos or Ciudadanos give in – likely in return for a pledge to implement at least some of its respective platform, with a focus on anti-corruption reforms – or Spain will have to hold new elections. The latter, at this moment in time, is probably a more likely scenario. In Catalonia, the new regional government has raised the stakes in the ongoing battle with Madrid, and will likely try to utilize the lack of a strong central government to make progress on the road to independence. Rajoy, on the other hand, could seek to benefit politically from these developments, campaigning on a platform to keep Spain together. The political storm has just begun.

Views expressed here are those of Ryan Barnes and do not represent the views of the U.S. Government.